Optimism back in New York as office rents soar
Optimism back in New York as office rents soar
By Jim Pickard in London
Copyright The Financial Times Limited 2007
Published: January 4 2007 17:24 | Last updated: January 4 2007 17:24
Office rents in New York are soaring again – more than five years after the 9/11 attacks prompted a fall in confidence in the city.
In just one year average occupancy costs have soared by 63 per cent in downtown Manhattan, which includes the financial heartland of Wall Street, according to a survey by agents DTZ. There, the cost of providing space for a typical worker has jumped from $7,560 (€5,729, £3,872) to $12,300 a year
Meanwhile, the office vacancy rate in Manhattan is below 7 per cent for the first time since the summer of 2001, before the attacks on the World Trade Center.
The US has been in the grip of an investment boom for several years, with buyers paying ever higher prices for commercial property. Sales in New York alone are thought to have hit $50bn in 2006, compared with $31bn in the previous year.
The relentless rise in prices came despite a previous lack of confidence in the underlying occupier market, where many employers were reluctant to take on new space in the wake of 9/11 and the stock market crash of that period.
Yet the last year has finally seen a recovery in most US office locations, according to the latest DTZ annual Global Office Occupancy Costs survey.
The cost of space in midtown New York rose 30 per cent, pushing it ahead of Washington DC as the most expensive US location at $16,400 a year per work station. Washington itself rose 8 per cent to $14,580.
In all, 87 per cent of the 39 locations surveyed by DTZ saw an increase in office costs.
These included Denver, Orange County and San Francisco, which had all remained stubbornly flat in previous years.
The only exceptions were Detroit, Columbus and northern New Jersey and Raleigh/Durham.
According to separate research by Reis Inc, a research company, the vacancy rate for office space in the 72 largest American markets has fallen to 13.5 per cent, its lowest since late 2001.
The upward drive in office markets would appear to vindicate a spate of recent takeovers of US real estate investment trusts.
This trend peaked in November with the $20bn takeover of Sam Zell’s Equity Office by Blackstone, the private equity firm. Blackstone and others have justified the prices paid for such deals by predicting further rental increases.
Europe remains the most expensive region in the world in which to rent office space, according to DTZ, although this may reflect the euro’s strength.
London’s West End, at $23,260 per work station, is the most expensive followed by Hong Kong at $19,730, Paris at $17,770, the City of London at $17,690 and Midtown New York.
By Jim Pickard in London
Copyright The Financial Times Limited 2007
Published: January 4 2007 17:24 | Last updated: January 4 2007 17:24
Office rents in New York are soaring again – more than five years after the 9/11 attacks prompted a fall in confidence in the city.
In just one year average occupancy costs have soared by 63 per cent in downtown Manhattan, which includes the financial heartland of Wall Street, according to a survey by agents DTZ. There, the cost of providing space for a typical worker has jumped from $7,560 (€5,729, £3,872) to $12,300 a year
Meanwhile, the office vacancy rate in Manhattan is below 7 per cent for the first time since the summer of 2001, before the attacks on the World Trade Center.
The US has been in the grip of an investment boom for several years, with buyers paying ever higher prices for commercial property. Sales in New York alone are thought to have hit $50bn in 2006, compared with $31bn in the previous year.
The relentless rise in prices came despite a previous lack of confidence in the underlying occupier market, where many employers were reluctant to take on new space in the wake of 9/11 and the stock market crash of that period.
Yet the last year has finally seen a recovery in most US office locations, according to the latest DTZ annual Global Office Occupancy Costs survey.
The cost of space in midtown New York rose 30 per cent, pushing it ahead of Washington DC as the most expensive US location at $16,400 a year per work station. Washington itself rose 8 per cent to $14,580.
In all, 87 per cent of the 39 locations surveyed by DTZ saw an increase in office costs.
These included Denver, Orange County and San Francisco, which had all remained stubbornly flat in previous years.
The only exceptions were Detroit, Columbus and northern New Jersey and Raleigh/Durham.
According to separate research by Reis Inc, a research company, the vacancy rate for office space in the 72 largest American markets has fallen to 13.5 per cent, its lowest since late 2001.
The upward drive in office markets would appear to vindicate a spate of recent takeovers of US real estate investment trusts.
This trend peaked in November with the $20bn takeover of Sam Zell’s Equity Office by Blackstone, the private equity firm. Blackstone and others have justified the prices paid for such deals by predicting further rental increases.
Europe remains the most expensive region in the world in which to rent office space, according to DTZ, although this may reflect the euro’s strength.
London’s West End, at $23,260 per work station, is the most expensive followed by Hong Kong at $19,730, Paris at $17,770, the City of London at $17,690 and Midtown New York.
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